The European Commission has now made available the public version of its decision issued in October 2014 to extend its formal state aid investigation into the tax rulings procedure contained within the Gibraltar corporate income tax regime (ITA 2010) in force since 2011. Companies resident in Gibraltar are subject to corporate tax at 10% on income ‘accruing in or derived from’ Gibraltar. Companies can apply for advance clearance on whether those incorporated in Gibraltar are liable to pay taxes in the territory.
The Commission’s assessment found the practice in Gibraltar to be ‘selective’ because the authorities grant formal rulings ‘without performing an adequate evaluation of such companies’ business in order to safeguard Gibraltar’s tax base’. The Gibraltar authorities allow ‘a large room for manoeuvre’ which ‘leads to a discriminatory treatment between companies in a similar legal and factual situation’.
The main findings are:
• there does not seem to be any designated procedure for the request of information by the Gibraltar tax authorities;
• the Gibraltar tax authorities do not conduct any substantive analysis or provide reasoning in the tax rulings; and
• misapplication of the provisions of the ITA 2010 in the tax ruling practice include:
o intermediaries’ activities are systematically exempted from taxation in Gibraltar;
o consultancy fees are systematically exempt from taxation in Gibraltar;
o interest is exempted where artificial structures are used and royalties are exempted where no attempt is made to verify where the user of the intellectual property is located;
o profits derived from marketing activities are exempted from paying taxes in Gibraltar;
o procurement of petroleum products and logistic organisation are exempted from taxation in Gibraltar without further assessment of the Gibraltar tax authorities; and
o tax rulings serve as a means to prolong the existing benefits under the tax exemption regime without any scrutiny.
Publication of the letter in the Official Journal of the European Union (see http://bit.ly/2e5hRRt) is meant to inform interested parties, who are invited to submit comments within one month of the date of publication (7 October 2016).
The European Commission has now made available the public version of its decision issued in October 2014 to extend its formal state aid investigation into the tax rulings procedure contained within the Gibraltar corporate income tax regime (ITA 2010) in force since 2011. Companies resident in Gibraltar are subject to corporate tax at 10% on income ‘accruing in or derived from’ Gibraltar. Companies can apply for advance clearance on whether those incorporated in Gibraltar are liable to pay taxes in the territory.
The Commission’s assessment found the practice in Gibraltar to be ‘selective’ because the authorities grant formal rulings ‘without performing an adequate evaluation of such companies’ business in order to safeguard Gibraltar’s tax base’. The Gibraltar authorities allow ‘a large room for manoeuvre’ which ‘leads to a discriminatory treatment between companies in a similar legal and factual situation’.
The main findings are:
• there does not seem to be any designated procedure for the request of information by the Gibraltar tax authorities;
• the Gibraltar tax authorities do not conduct any substantive analysis or provide reasoning in the tax rulings; and
• misapplication of the provisions of the ITA 2010 in the tax ruling practice include:
o intermediaries’ activities are systematically exempted from taxation in Gibraltar;
o consultancy fees are systematically exempt from taxation in Gibraltar;
o interest is exempted where artificial structures are used and royalties are exempted where no attempt is made to verify where the user of the intellectual property is located;
o profits derived from marketing activities are exempted from paying taxes in Gibraltar;
o procurement of petroleum products and logistic organisation are exempted from taxation in Gibraltar without further assessment of the Gibraltar tax authorities; and
o tax rulings serve as a means to prolong the existing benefits under the tax exemption regime without any scrutiny.
Publication of the letter in the Official Journal of the European Union (see http://bit.ly/2e5hRRt) is meant to inform interested parties, who are invited to submit comments within one month of the date of publication (7 October 2016).
.tmb-editorspic.jpg?sfvrsn=df04ab27_1)
